Kitco News | "Fed is ‘all talk, no action’ as debt pressure sets stage for higher gold price - AuAg’s Eric Strand"

Markets are positioned for higher US interest rates, which has supported the dollar and weighed on gold. Speaking to Kitco News, Eric Strand, founder of AuAg Funds, argues that the positioning rests on a reading of inflation that simply doesn’t hold.

Valuable insights:

• Inflation is a loss to a lender and a relief to a borrower: a debt is a fixed number of dollars, so when prices, incomes and tax receipts all rise, the same 40 trillion is measured against a larger economy and weighs less against it – which is why Strand argues that inflation ends up being part of the answer to the debt rather than only a problem sitting beside it.
• You can’t grow out of a debt problem and raise rates to cool demand at the same time. One needs people spending, the other needs them to stop. So when a government’s growth plans and a central bank’s tightening talk arrive in the same week, at least one of them has to be rhetoric.
• A new mine takes well over a decade to get from discovery to production, while demand from defence, artificial intelligence and infrastructure can shift within a year or two. However fast demand rises, the metal cannot be dug any faster. What is left is the metal already above ground, and buyers competing for it.